FHA to make appraisal deliveries through its new technology mandatory

The Federal Housing Administration on Wednesday set a date by which all electronic appraisals must be delivered through FHA Catalyst, including those done in conjunction with Home Equity Conversion Mortgages.

Starting March 14, 2022, delivery of electronic appraisals through FHA Catalyst will become mandatory for single-family loans unless a previous version was submitted through legacy technology. In cases where legacy technology submissions occurred prior to March 14, 2022, the older channel can be used until April 15 of next year.

The required use of the Federal Housing Administration’s cloud-based Catalyst platform for electronic appraisal deliveries may accelerate the collection of valuation data from a government agency that insured nearly one-fifth or 17% of all purchase loans in 2020.

The increased data could help to illuminate much about the reverse mortgage market in particular. The FHA’s HECMs dominate the small market for these specialized equity withdrawal loans made to older borrowers.

Between the FHA’s appraisal database and a similar but separate one built by major government-sponsored secondary mortgage market investors Fannie Mae and Freddie Mac, appraisal data on the vast majority of home loans in the U.S. market is being collected for reference. That could boost the number of instances in which appraisal waivers can be used. Waivers, which can shorten origination timelines and cut costs, are most used in conjunction with no-cash-out refinances, but the collection of appraisal information from new purchases is the key to maintaining enough recent data to support them.

New users of the FHA Catalyst system for appraisal deliveries will need to go through an onboarding process before the mandatory use date. Mortgage companies or their vendor representatives must sign up for direct integrations in waves scheduled for October, November, and December.